It was formed in 1881 from the merger of several smaller railroads.[2] Passenger service in Northern New Jersey was offered until 1966. The New York, Susquehanna and Western was purchased by the Delaware Otsego Corporation in 1980,[3] and became a regional player during the 1980s in the intermodal freight transport business.

The NY&OM reached Middletown, New York, and leased the connecting Middletown, Unionville and Water Gap Railroad (MU&WG), which reached the NJM at Hanford. The last stretch of construction from Hackensack to Jersey City completed the NJM in 1872. The first through train from Oswego to Jersey City operated on July 9, 1873. While the goals of the two partners had been reached, the Panic of 1873 caused financial ruin for both companies. The NY&OM suspended lease payments, and the agreement was broken. The NY&OM was reorganized as the New York, Ontario and Western Railway in 1879, and went its separate way. The NJM took over the lease of the MU&WG as well. Unable to weather the financial storm, the NJM was put into receivership in 1875.[5] In 1880, the NJM was reorganized as the New Jersey Midland Railroad (NJM), and attention was turned to the lucrative coal fields of eastern Pennsylvania.

American financier J.P. Morgan began to take notice of this rapidly expanding coal-hauler, and quietly bought up its stock on behalf of the Erie Railroad. The railroad was leased by the Erie in 1898, and soon after took over complete operation of the line.[7][8][9]

The NYS&W fell on hard times during the economic recession of 1957. The NYS&W lost its western connection to the Lehigh and New England Railroad when the L&NE ceased operations in 1961, resulting in the NYS&W pulling up all its track west of Sparta Jct. (which now comprises what is now known as the Paulinskill Valley Trail). Thereafter, the NYS&W sold off its nearly new Budd passenger cars and replaced them with second-hand used equipment. Desperate to close its money-losing commuter service, the railroad's trustees offered its commuters $1,000 each to stop using the trains. Permission to end commuter service was granted in 1966. Washouts caused by Tropical Storm Doria (1971) cut off other connections, and the railroad retreated to Butler, New Jersey.

The NYS&W declared bankruptcy in 1976 after failing to pay New Jersey state taxes, though managed to stay out of Conrail, which had surrounded it. The bankruptcy court ordered that the railroad be abandoned and its assets sold. By then, the NYS&W was down to a 43-mile line from Croxton and Edgewater through Paterson to Butler. The State of New Jersey, aware of Delaware Otsego Corporation's reputation at rehabilitating short lines, asked them to take over the railroad.

1990 saw the NYS&W end service on its Edgewater Branch, a 1.5-mile (2.4 km) long line connecting its former Hudson River terminal with the mainline in Fairview at Undercliff Junction. As of 2008, the tunnel carries a pipeline owned by the Amarada Hess Corporation.

In 1994, Onondaga County, New York purchased the former Delaware, Lackawanna and Western Railroad (DL&W) line into Syracuse, with the provision that the NYS&W operate RDC service in Syracuse between Syracuse University, Armory Square, and the Carousel Mall with the option for further routes, leading to the creation of OnTrack. With operations on this segment, the Syracuse branch was rehabilitated and the Conrail interchange relocated. Regular steam excursions were offered and RDCs refurbished for OnTrack use. Intermodal trains rolled beyond Binghamton to Syracuse for interchange with Conrail. After a few years, regular excursions were halted.

With the impending break-up of the Conrail system to Norfolk Southern Railway and CSX Transportation, the NYS&W was a ripe target for acquisition, as it could potentially siphon lucrative traffic away from either road. On October 3, 1997, DOCP Acquisition LLC announced it had completed the short-form merger of Delaware Otsego Corporation (NASDAQ:DOCP) with a wholly owned subsidiary via a stock tender offer of $22 per share.[12]

This deal essentially brought the D.O. System of Railroads, including the subsidiary New York, Susquehanna & Western Railway (NYS&W), under control of the much larger Norfolk Southern and CSX rail systems, because the new owner DOCP Acquisition LLC is owned 40% by Norfolk Southern, 40% by CSX and 20% by Walter G. Rich of the Delaware Otsego Corporation.[13]

In 2005, the NYS&W leased the former Erie Main Line from Port Jervis to Binghamton from Norfolk Southern. Leased and operated under the name Central New York Railroad (CNYK). The CNYK is a "paper" railroad and all train operations and line maintenance is performed by Susquehanna personnel, while Norfolk Southern Railway retains overhead trackage rights. Currently there are only 6 trains a week operated by the NYS&W on the line, one in each direction, three times a week. At this time there is no traffic from the Norfolk Southern. The newly reactivated Stourbridge Railroad (SBRR) depends on the NYS&W for interchange at Lackawaxen, Pennsylvania.

In 2006, NYSW's Utica Main Line had storm damage. The storm damage washed out sections of track in Chenango County putting the branch to Utica out of service. NYS&W continued serving customers on the line in the Utica area and south to Sangerfield from the CSX interconnection in Utica. In 2011, a project to restore the line was started by the Chenango County Industrial Development Agency with funding by the agency, Chenango County, the New York State Department of Transportation, and the federal Economic Development Administration. Work began in March 2016 with the clearing of brush along the 45.5 miles (73.2 km) right-of-way in Chenango County. Subsequent work included filling in washouts, replacing ties, resurfacing bridge decks, reactivating crossing signals, and other repairs. The restoration project was completed and rail service restored on May 2017.[14]

On August 9, 2007, D.O. founder Walter Rich died of pancreatic cancer.[15] After President Rich's death, the new President Nathan Fenno, almost immediately cancelled all passenger operations and excursions and the fleet used on them was sold off. Many older diesel locomotives were sidelined, retired, and sold during this time as well.

In July 2011, NYS&W took possession of five leased CEFX locomotives, to ease the railroad's continually worsening power shortage. These five locomotives were used as a supplement to its current EMD 645 fleet in road train service, and occasionally local duty. It was not uncommon to see road train line-ups consisting of entirely leased power.

^Robert E. Mohowski (2003). The New York Susquehanna & Western Railroad. The Johns Hopkins University Press. ISBN0-8018-7222-7

^ abcDrury, George H. (1992). The Train-Watcher's Guide to North American Railroads: A Contemporary Reference to the Major railroads of the U.S., Canada and Mexico. Waukesha, Wisconsin: Kalmbach Publishing. pp. 173–175. ISBN0-89024-131-7.